For the first time, energy execs are requesting caps on carbon emissions. But will new regulations be too little, too late?

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April 10, 2006 2:00PM (UTC)

On April 4, there was a tectonic shift in the climate change debate during an all-day Senate conference on global-warming policy. A group of high-powered energy and utility executives for the first time issued this directive to Washington: Bring on the carbon caps!

The Senate Energy and Natural Resources Committee heard statements from leaders representing eight big energy companies, including General Electric, Shell and the two largest owners of utilities in the United States, Exelon and Duke Energy. Six of the eight said they would either welcome or accept mandatory caps on their greenhouse-gas emissions. Wal-Mart too spoke in favor of carbon caps. The two outliers from the energy sector, Southern Company and American Electric Power, delivered pro forma bids for a voluntary rather than mandatory program, but they, too, broke with tradition by implicitly acknowledging that regulations may be coming, and offering detailed advice on how they should be designed.

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Many industry players are increasingly concerned about the inconsistent patchwork of climate regulations that are being proposed and adopted throughout the country, from the Regional Greenhouse Gas Initiative that seven Northeastern states put forward in December to plans for greenhouse-gas caps unveiled in California this week. Worried companies say federal regulations would bring stability and sureness to the market.

"GE supports congressional action now," David Slump, the top marketing executive in GE's energy division, said at the hearing.

"It is critical that we start now," said Elizabeth Moler, an executive vice president for Exelon. "We need the economic and regulatory certainty to invest in a low-carbon energy future."

Senate hearings rarely manage to draw a crowd of 60, but for this one some 300 members of Congress, lobbyists and advocates crammed themselves into the hearing room, according to Jonathan Black, a minority staffer on the energy committee, and more watched via a live webcast.

"It's the most widely attended hearing that I've ever been to for this committee," said Sen. Dianne Feinstein, D-Calif., "and that shows the gravity of this issue."

Said John Stanton, a vice president of National Environmental Trust, "I began the morning far more cynical than I felt at the end of the day." The conference was "remarkably devoid of the climate-skeptic malarkey that usually derails the debate at these sorts of events," he said. "You actually had real experts making real progress -- hashing out the nitty-gritty of exactly how this emissions-trading system could be implemented."

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Of course, there are still plenty of energy companies that oppose caps, and the conference didn't hear from anyone in the auto industry, a major contributor to greenhouse-gas emissions and a major opponent of moves to curb them.

But the conference organizers -- energy committee chairman Pete Domenici, R-N.M. and ranking committee member Jeff Bingaman, D-N.M. -- were anxious to push the debate forward with the companies that did participate.

The conference grew out of an energy bill amendment introduced last June by Bingaman -- a cap-and-trade scheme that would impose limits on greenhouse-gas emissions while allowing companies to buy and sell the right to emit. The proposed caps were not very ambitious, say environmentalists; they would have required polluters to gradually curb and then halt the growth of their greenhouse-gas emissions by 2020, but not actually reduce those emissions from current levels. The legislation would also have placed an upper limit on the price for pollution credits of $7 per metric ton of emissions so as to keep emitters' costs relatively low and predictable. That's too restrictive, enviros say, as such credits in the European market are currently trading at about $30 per ton.

Perhaps because his initiative was fairly modest, Bingaman managed to rally notable bipartisan support for it, including the critical backing of Domenici. At the eleventh hour, however, Domenici pulled out, saying he wanted to further investigate how the trading scheme would work, and the amendment failed to pass. Instead of Bingaman's amendment, the Senate passed a nonbinding "Sense of the Senate" resolution acknowledging the need for federal action on climate change.

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But Domenici promised Bingaman he'd pick up the issue again this year, and he kept his word. In February, the duo issued a 14-page white paper (MS Word file) asking industry members and environmentalists to respond to questions about the inner workings of a cap-and-trade program. What sectors of industry should be required to meet the caps? How could an emissions-trading system best stimulate technology development? How could it be linked to systems already operating in Europe and Japan, under the Kyoto Protocol? They received more than 160 responses (PDF) from energy companies, trade organizations, green groups, scientists and others, a selection of which were presented at the April 4 hearing.

With Domenici and Bingaman leading the conference, debate revolved around the market-based structure and broadly acceptable targets of the amendment they worked on together last June. That amendment will be the basis for a new bill the two are expected to release sometime in the coming months.

This focus on the Bingaman-Domenici strategy disappointed the Beltway environmental community, which prefers the McCain-Lieberman Climate Stewardship Act. First introduced in 2003, it would not just slow the growth of U.S. climate emissions, but reduce them to 2000 levels by 2010.

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Meanwhile, Feinstein is expected to introduce another climate bill this month, essentially a compromise between the McCain-Lieberman and Bingaman-Domenici proposals.

Karen Wayland, legislative director for the Natural Resources Defense Council, worries that as the Bingaman-Domenici plan becomes the central point of reference for the climate debate in the Senate, stronger proposals could get pushed off the radar screen. "We welcome the attention it's bringing to the climate debate," she said, "but we're very concerned that the Bingaman proposal does not set targets strong enough to address the urgency of the crisis."

According to Wayland, the behind-the-scenes logic of Bingaman and his allies is that if they devise a proposal that can be passed in the near term, targets could be ratcheted up later. She questions that approach, arguing that landmark legislation like this only gets passed once every five or 10 years, and that lawmakers may rest on their laurels once an initial climate change bill becomes law.

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Still, Lieberman told Muckraker via e-mail that he was optimistic about this week's conference: "Sen. Domenici and Sen. Bingaman's event [April 4] did a good job of educating the Senate about the basic building blocks of the very approach to combating global warming that Sen. McCain and I advocate," he wrote. "There has been a raft of new tangible scientific evidence since the last vote on our bill last spring ... meaningful action is now that much more urgent. Sen. McCain and I are looking very hard at forcing another Senate vote on our bill this year."

Domenici is less ambitious in regard to his own proposal. He recently said the climate issue is "too contentious" for a Senate vote in 2006, and the earliest he expects any climate legislation to be considered is 2007. Bingaman, too, seems resigned to slow progress; he has predicted that federal climate legislation won't be enacted until President Bush is replaced in 2009.

David Doniger of the NRDC, like some of the energy executives who spoke at the conference, doesn't think the country can wait that long. "We're facing very real dangers that require real action," he told the gathering. "These emissions cuts must come within the next 10 years. Delay makes the job much harder. A slow start means a crash finish."

Amanda Griscom Little

Amanda Griscom Little is a columnist for Grist Magazine. Her articles on energy, technology and the environment have appeared in publications ranging from Rolling Stone to the New York Times Magazine.